Chinese President Xi Jinping has created a new security commission to tackle threats to the country’s financial markets, reports George Chen and Teddy Ng of the South China Morning Post.
The commission will also appoint a “financial security commissioner” with experience in the industry, and confront problems that “affect domestic and social stability” — like unusual priced moves in the stock market and speculative foreign capital.
Since the Third Plenum meeting on economic reform, Xi has taken major steps toward consolidating the power of the Presidential office in anything that has to do with China’s economy.For example, leadership of the Central Finance and Economy Lending group — the group the decides on economic reform — was taken from the office of Premier Li Keqiang, and put under the office of the President.
Li will be the vice-chair of this new committee, under Xi.
There are two things to note here, and they both have to do with foreign capital.
First, the the State Administration of Foreign Exchange has traditionally dealt with hot money flowing into the country, and incidentally the agency’s Chief Investment Officer, Zhu Changhong (formerly at PIMCO), just resigned.
And second, according to the SCMP, the Chinese are concerned that foreign capital bubbling up through the shadow banking system has destabilized the Chinese financial system.
Some government agencies had been collecting evidence and data in recent years to prove how speculative foreign capital – “hot money” – moved through the underground banking system, rocking the stock market and affecting local investors’ confidence in the mainland’s economic development.
China’s nationalists, who’s voices seem to be getting louder of late, have decried this before as harmful speculation from Western short sellers.
Now it seems this is a matter for China’s highest office.